Trending Tags

Follow

About Michael J. Miller

Miller, who was editor-in-chief of PC Magazine from 1991 to 2005, authors this blog for PC Magazine to share his thoughts on PC-related products. No investment advice is offered in this blog. All duties are disclaimed. Miller works separately for a private investment firm which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.

Marc Andreessen: Revisiting the Dot Com Boom, This Time with the Right Technology

At the Wall Street Journal's All Things Digital conference on Wednesday
night, Netscape founder and venture capitalist Marc Andreessen said that
technology moves in cycles and today's Internet startups are
succeeding at many of the things companies tried and failed at in the
tech boom of the late 1990s. He also said, he didn't see a "bubble" in
the prices of technology stocks, but that he was glad others did.

Andreessen talked about being on the cover of Time Magazine in 1996 with
a cover called "The Golden Geeks," and he noted that in 1993 and 1994, the
Internet was mostly considered a toy, with more of the hype around
things like interactive TV. It was only in the following few years that
people started taking the Internet seriously.

After that, he said, there was a lot of hype, but in the 90s "we got
ahead of ourselves" and in many respects, "the technology wasn't really
there yet." He discussed building Mosaic in 1993, in the era of Windows
3.1 and dial-up modems, and noted that only 40 or 50 million people were
online by the end of the 90s. When they were working on Mosaic at the University of Illinois, Andreessen said, "We didn't have the sense to think it was going to be something really big." He recalled buying the first issue of Wired, and how it didn't even mention the Internet except in one wrong email address in Nicholas Negroponte's column on the back page.

Now the technology has improved, he said, and "we can do all of the things we wanted to do back then."

Discussing his second company, LoudCloud, he said, "The good news is we decided to focus on cloud computing; the bad news is we were 10 years too early." He noted that the company started well, but then most of its customers went bankrupt in the technology bust at the end of the 90s, and they needed to reinvent the company as a software firm. Later, he pointed out that the outsourced cloud services Loudcloud charged $150,000 a month in 1999, and Amazon now offers it for $1,500 a month.

He said he then did a lot of private angel investing that mostly lost money. For instance, he invested in a firm in 1999 that was a lot like Groupon, but was 10 years too early.

In the middle of the last decade, he started angel investing more seriously, starting with Linked In, and he eventually began doing a deal a month. He mentioned that he joined the board of Facebook three years ago, but was not an angel investor there.

And then more recently, he and partner Ben Horowitz started a VC firm, because they "thought there was room for a different approach." In some ways, he said Andreessen Horowitz was a "throwback" because it was started by people who had experience operating companies, were focused exclusively on computer science and IT, and were overwhelmingly Silicon Valley focused.

When asked if the current state of technology valuations meant we were in another "bubble" of overinflated expectations, he took the opposite view. He said, in 1999, everybody was euphoric; now everybody is upset, so it wasn't a true bubble. A very large number of people think there is a bubble, which makes us think there isn't a bubble.

He said if people think there is a bubble, it will keep the prices down. He then went on to list some price/earnings ratios he thought were particularly low, noting that Apple's price/earnings ratio is 12, Microsoft's is 7, and Google's is 13.7 based on this year's earnings, and 11 based on next year's. "The public market hates tech," he said, saying it was scarred in the dot-com boom and bust 10 years ago.

When asked about "apps vs. browsers," he said the browser made sense in the 90s, because you had to buy applications and install it locally and update it. He said the same principle holds true in the phone model, even though the app process is much better now with iPhone and Android than it was on Windows and the Mac.

Apps makes sense as long as the world is bandwidth limited (for years), but in the long run the browser model will make even more sense, Andreessen said, noting that the two can coexist as companies can build HTML 5 applications and wrap them to create applications.

"As long as you're connected all the time to an infinitely fast network, then the browser model makes total sense," he said. Until then, you'll need apps for some things.

In response to questions about Eric Schmidt's early talk of a "Gang of Four" important platform vendors, he said that the new platform vendors like Apple and Google have a lot more control than Windows and Macintosh ever did, but there are new kinds of platforms, like Facebook, Twitter, Amazon and others.

He said there was a proliferation of platforms, and Microsoft remains a very big and important company. But he pointed out that the PC, tablet, and smartphone markets are increasing, and in those markets, Microsoft fell below 50 percent for the first time about a year ago, due to the rise of tablets and smartphones. The more fragmentation that develops, the more it pushes Web development.

He also discussed the challenges facing the mobile Web, saying smartphones have driven demand on the mobile networks and he thought this would lead to more consolidation, more WiFi, and reclaiming some analog spectrum for broadband, as well as new technology. He said he didn't think wireless caps were great, but he thought WiFi offered an escape valve.

Automatic Renewal Program: Your subscription will continue without interruption for as long as you wish, unless
you instruct us otherwise. Your subscription will automatically renew at the end of the term unless you authorize
cancellation. Each year, you'll receive a notice and you authorize that your credit/debit card will be charged the
annual subscription rate(s). You may cancel at any time during your subscription and receive a full refund on all
unsent issues. If your credit/debit card or other billing method can not be charged, we will bill you directly instead. Contact Customer Service